$1 billion impasse may affect Valley

Advocates for local projects tracking feud over state borrowing.

Three of the leading Democrats in the commonwealth of Pennsylvania: (From…

December 02, 2010|By John L. Micek and Matt Assad, OF THE MORNING CALL

HARRISBURG — Construction projects at Lehigh Valley Hospital and SteelStacks Performing Arts Center are among two dozen local initiatives caught in a crossfire among three of the state's top Democrats.

A month before he leaves office, Gov. Ed Rendell wants to borrow $1 billion for public works and construction projects that are under contract or in the works.

But two of the state's elected fiscal watchdogs — Auditor General Jack Wagner and Treasurer Rob McCord, both Democrats like Rendell — have balked at that much borrowing, and Rendell needs signatures from one of them to do it.

Borrowing $1 billion would cost taxpayers $547 million in interest over the loan's 20-year repayment period.

The Rendell administration has warned that pulling the funding on hundreds of affected projects would result in lost jobs and possible litigation — because the state has contracts with construction companies and other firms to finish the work.

Gary Tuma, the governor's spokesman, described the spending as routine — not a late spree, as some critics contend.

The projects at Lehigh Valley Hospital and SteelStacks are included in the state's Redevelopment Assistance Capital Program, or RACP. And officials involved in the projects say continued state funding is critical to finishing them on time.

"It's money that we're hoping to draw down," LVH spokesman Brian Downs said, referring to $700,000 earmarked for a community treatment center at 17th and Chew streets in Allentown intended to serve the underinsured and the uninsured. "Those projects are under way now."

Elsewhere in Lehigh County, funding for improvements to athletic fields at Lehigh Carbon Community College and the Overlook Park public housing development in Allentown also could be affected by the dispute, according to a projects list provided by Rendell's office.

Bethlehem has seen the benefit of its share of RACP money during Rendell's eight years as governor, and it has more than $26 million on the governor's list of projects that could be funded under the $1 billion bond. Still, city officials aren't worried — yet.

"We heard rumors that Corbett might want to harvest unused RACP money," said Tony Hanna, Bethlehem's director of community and economic development. "But all of our current RACP money is under contract. We figure if we have a signed contract that means that money is there to be used."

SteelStacks, a $26 million ArtsQuest performing arts center and concert venue in Bethlehem, is listed by the Rendell administration as needing $13.25 million from the yet-to-be-approved bond. That surprised Hanna. The project broke ground last summer and is due to be completed in May.

"If someone is saying projects under contract might not get funded, then I'd expect a flurry of lawsuits to be filed," Hanna said. "I can't imagine they would gut funding for SteelStacks. That building is half-done."

In a letter to Rendell sent Wednesday, Wagner said the state's debt load had increased by 39 percent, from $6.1 billion in June 2002 to $8.4 billion as of Nov. 18. The extra $1 billion would swell the state's debt by 12 percent to more than $9 billion and that "is too much to put on the backs of our children and grandchildren."

McCord, a former investment banker and venture capitalist before he took office, said through a spokeswoman that he understands the need for government debt, but he wants to make sure the state gets the biggest bang for its buck on the bond market.

McCord sent a letter to Corbett on Wednesday, asking him to review the proposal. Corbett's administration, which takes office on Jan. 18, will be responsible for finding the money to pay off the debt.

It's not unusual for outgoing administrations to take on some debt as they head out the door — Republican Mark Schweiker borrowed $500 million in 2003. But "the proposed $1 billion issuance is substantially larger than its predecessors," McCord wrote.

Corbett's spokesman, Kevin Harley, said the incoming governor was reviewing the list of affected projects. He set no date for the completion of that review.

"One of the things we're trying to do is determine which projects are already begun and how far along they are," Harley said, adding later, "What we don't want to do is put the Commonwealth in a position … where the state could open itself to litigation."